In March, energy price inflation among the Organisation for Economic Co-operation and Development (OECD) member countries surged by 8.6 percentage points in just one month. This marks the third-largest increase since the OECD began tracking these statistics in 1971.
While South Korea maintained a relatively low rate of 5.2% compared to other major economies, the 16.1% spike in import prices suggests a high likelihood of this increase eventually trickling down to domestic consumer prices.
A recent OECD report reveals that the overall consumer price inflation rate across all member countries hit 4.0% in March. This figure, which had dropped from 4.1% last September and hovered in the low to mid-3% range in early 2023, jumped 0.6 percentage points in March. Of the 37 member countries with available monthly data, 33 saw increases from the previous month.
Year-over-year OECD energy prices in March rose by 8.1%, the highest since February 2023 (11.9%). Compared to February’s 0.5% decrease, the 8.6 percentage point jump marks the steepest climb since April 2021, following the base effect of the COVID-19 oil price crash. This increase ranks as the third-largest since the OECD began compiling these statistics in 1971.
The record increase occurred in November 2009, driven by the base effect of the 2008 financial crisis oil price crash and subsequent economic recovery, hitting 11.6 percentage points.
The report cites Middle East conflicts as a key driver of energy price increases. Among the 35 member countries with monthly energy price data, 32 reported higher inflation rates than the previous month, with seven countries experiencing double-digit increases.
This trend was mirrored in G7 nations. While the G7 consumer price inflation rate rose modestly from 2.1% in February to 2.8% in March, energy prices skyrocketed from -1.8% to 8.2%, a staggering 10.0 percentage point leap.
South Korea’s March energy price inflation stood at 5.2%, lower than other major economies like the U.S. (12.5%), Germany (7.6%), and France (7.1%). This relative stability can be attributed to policies such as fuel tax cuts and oil price caps.
However, mounting pressure from import prices is cause for concern. The preliminary March import price index (in KRW) surged 16.1% month-over-month, reaching its highest level in 28 years and 2 months since January 1998 (17.8%). Producer prices also climbed 1.6%, the steepest increase since April 2022, shortly after Russia’s invasion of Ukraine.
The domestic supply price index rose 2.3% month-over-month, the highest since April 2022 (2.7%). This indicates broadening price pressures across the entire supply chain, affecting both imported and domestically produced goods.
While April’s consumer price inflation rebounded to 2.6%, it remained at a modest 1.8% when excluding petroleum products.